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Lost Another Client

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Real Estate Appraiser with Accurate Appraisals & Consulting of AZ

I did an appraisal recently on a new build in a new subdivision. The buyers (one R/E Agent and one L.O.) that I have received business from (sporaticly) over the past 2 years, had the LO's company order an appraisal on the house they were buying.  Rush order, needed to close before Xmas.

My research found 5 good comps in the market area less than 1 mile from the subject within the past two months. Also found 3 active and 1 pending good comps in the same area. Delivered my report with the value I determined, everyone was happy!

The next day I get the email the from lender and calls from borrowers! They need (lender words) a minor detail change.  It seems the buyers will need to come up with an additional 5% down. Why?  Because the box for declining market was checked instead of stable.   Needs to be changed and all graphs included in the report removed.

My reply - Can't do that.  My research data (documented in my work file - data, spreadsheets, graphs) and analysis of the market conditions of the subject's market area and surrounding area (for the past 12 months each), and city (for the past 7 years) all indicate and support a declining market conclusion.  Doing so would result in a misleading report and a violation of regulations.

Lender says they can't use the report. One borrower crying, screeming, and cussing me out over the phone for ruining their Christmas - the other borrower claiming they recently closed two deals where the appraisals showed a stable market, by two other appraisers, and if I won't change the report, they will get one of the other appraisers "who will do it right" and not do business with me in the future!

With all the dramatic changes in the Real Estate Market during 2007, it is still common practice for the appraiser to be blamed by everyone when a deal falls thru.  Either by loosing clients and business, being black listed or added to a "Do Not Use List", having complaints filed against them, or threated with lawsuits by everyone and their brother, it is quite clear that others in the real estate industry still do not understand the role of the appraiser.  While there are many unethical appraisers, who disregard regulations and requirements, providing service to others in the industry that seek them out as "team players", it is the Ethical Appraisers who are being deminished.  So I am providing this information (without going into too much depth) to enlighten those of what is required and expected of a real estate appraiser.

Appraisers have regulations that they are suppose to abide by to retain their license.  Lenders have some also.
In addition to USPAP - Uniform Standards or Professional Appraisal Practice (which has changes going into effect Jan 1, 2008), appraisers are expected to follow and meet FannieMae requirements and FreddieMac requirements also, which is to the benefit of Lenders when selling the mortgage loans.

FannieMae issued amended guidelines, earlier this year, for Lenders and Appraisers regarding Collateral Valuation Practices and Declining Markets. I'm sure everyone is or should be aware of. Here is part of it.

Reiteration of Appraisal Guidelines
As stated in Part XI of the Selling Guide, lenders are ultimately responsible for the accuracy of both the appraisal and its assessment of the marketability of the property. In addition, both the lender and the appraiser have certain responsibilities related to the valuation, as reiterated below.

Lender Responsibilities
The lender has the sole responsibility for managing the appraiser relationship and general activities of the appraiser it selects. As such, the lender should verify that the appraiser provides an accurate, independent, and adequately supported opinion of the value and property description, and has considered available public and non-public information concerning local trends in home prices.
At a minimum, the lender is expected to:
· Review the appraisal report to ensure consistency with our appraisal standards, analyze the property based on the appraisal, and evaluate the property's acceptability as security for the requested mortgage loan in view of its market value and marketability.

· Ensure that the appraiser analyzes listings and contract sales, if available, along with the most recent closed or settled sales. If the lender determines that the appraisal does not accurately reflect the current market conditions, the lender is expected to request additional clarification or justification from the appraiser, as necessary, to make an informed decision about the property value.

· Have appropriate business controls in place to ensure that no actions are taken by its employees, agents, or third-party originators that may compromise the accuracy of the appraisal report. Such controls may include separating the appraisal ordering process, if possible, from those who have a financial interest, both internal and external, in the transaction. It is unacceptable for a lender's employee, agent, or third-party originator to apply pressure or unduly influence the appraiser to reflect certain results in his/her analysis or reporting. Any identified instances of appraiser pressure will cause the mortgage loan to be subject to immediate repurchase by the lender.     (I have to interject here - This can also occur when an appraiser does not get paid for the service provided.)


Appraiser Responsibilities
The appraiser's role is to provide the lender with an accurate and adequately supported opinion of value and an accurate description of the property. We expect the appraiser to accurately report on the primary indicators of market conditions in a given neighborhood whether increasing, stable, or declining.
At a minimum, the appraiser is expected to:

· Use the most recent and similar comparable sales available as part of the sales comparison approach. Because excessive sales concessions can artificially inflate the sales price of a property, particular attention should be given to unusual sales or financing concessions in markets experiencing:

              o Declining property values,
              o An over-supply of properties, or
              o Marketing times in excess of six months.

· Provide an objective assessment of the primary indicators of market conditions in a given neighborhood whether they are increasing, stable, or declining. For example, when indicators such as price changes, supply and demand, and market activity reflect a decline in property values, an over-supply of homes, and/or marketing times in excess of six months, Fannie Mae expects that the appraiser has considered these factors as part of his or her analysis, and accurately reflects this information in the appraisal report.

· Describe the reasons for these trends and indicate what, if any, impacts these trends have on the opinion of the market value for the subject property. It is unacceptable for the appraiser to ignore these issues and not report the factual property value trends and market conditions.

• Research and/or review available information regarding the home price trends of the market in question.

FreddieMac issured a bullitin in November 2007 - Here is part of it.

DECLINING MARKETS

Lending Practices in Declining Markets

Many areas of the country are experiencing significant and on-going property value depreciation. While the decline in average home prices is widespread, the amount of the decline varies and may be significantly worse than the national average in some areas. In light of these market conditions, we are reinforcing our appraisal standards and underwriting expectations related to maximum financing in declining markets.

Appraiser responsibilities when performing an appraisal

The purpose of an appraisal is to provide the Seller with an accurate and adequately supported opinion of value, based on our definition of market value. Appraisers must determine whether the property they are appraising is located in an increasing, stable or declining market. In reporting the property-value trends, appraisers certify that they have performed an objective and complete analysis of quantifiable data supporting their conclusion. Appraisers must support their conclusions by providing relevant information relating to the property-value trends, demand/supply and marketing time.

Appraisers must also provide a description of the prevalence and impact of financing assistance, e.g. concessions, gifts, or down payment assistance, paid on behalf of a Borrower as well as the assistance generally available in the market. They must also research and comment on the days-on-market, including expired listings of the subject and comparables, as well as list-to-sale price ratios, and the availability of financing. The opinions of value must reflect the value and marketability of the property without concession. 

Seller responsibilities for appraisals

While it is an appraiser's responsibility to indicate the property-value trends in the market in which subject properties are located, Freddie Mac expects Sellers to be aware of market trends in their lending areas. We hold the Seller accountable for the quality, integrity and accuracy of the appraisal.

Among other things, Sellers are responsible for:

� Selection of an appraiser qualified to perform an appraisal of the subject property, without attempting to influence the appraiser's results;

Providing the appraiser with the sales contract and other information available about the subject property and transaction, including any funds paid on behalf of the Borrower, whether or not the funds are considered an interested-party contribution subject to contribution limits

� Properly underwriting the appraisal to ensure that the appraiser's opinion of value meets the definition of ‘market value', and that the appraisal is accurate and fully supported

Sellers are reminded that appraisals must comply with the Uniform Standards of Professional Appraisal Practice (USPAP), applicable Advisory Opinions, laws and regulations, and Freddie Mac requirements.

 

Show All Comments Sort:
Greg Myers
G L Myers Real Estate Services - Chapel Hill, NC
Appraising is one of the few jobs where quality work can make people angry. All we can do is maintain our think skin and show the quality of our character. Over the long term I believe that is the most profitable approach.
Jan 12, 2008 01:03 PM
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ
AZAppraiser

Ken  - I agree the requirements, educational cost, and time factor in obtaining a license is a substantial investment a person makes for a career in appraisals.  Newbies should look at it as a career rather than just a job, and their choice of a supervising appraiser can stear them towards a career path or a Skippy job path. 

Greg  -  Everyone wants and expects quality work.  They get angry when the quality required doesn't produce the results needed.  Those in the business that reduce their fees below the industry standard, for increased business, aren't producing the quality required in my opinion.  As the saying goes "You get what you pay for".

 

Jan 13, 2008 04:39 AM
Dawn Workman
Veracity Real Estate Group, LLC - Camas, WA
Camas Real Estate Expert, MBA, 480-540-8100
Two thumbs way up!  Good for you for being honest!!
Jan 16, 2008 03:50 PM
Anonymous
Curious Professional

David - Excellent post, and a much neede reminder for some of those in our industry that forget, are unaware, or just blatantly disregard the fact that there are specific guidelines and regulations relating the the performance of CVP's. It's a shame that the barrier to entry for this business hit such a low threshold over the years.

Just out of curiosity, and generally speaking, have you ever been placed in a position (other than that of the scenario in your post), where it was appropriate and necessary to report a party to a transaction to a regulatory agency? I suspect this seldon occurs, which is unfortunate since it would send a clear message certain individuals that rules are rules and they are not to be broken - for the good of everyone.

Thanks

Jan 20, 2008 02:46 PM
#21
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ
AZAppraiser

Curious Professional  -  Thanks for your comment.   Suspecting this seldom occurs is INCORRECT!  This and many other types of scenarios involving regulation violations occur quite frequently.  The sad fact is, there are very few appraisers that will admit it, or have the guts and ethics to refuse assignments, or report anyone to an agency.  A vast majority will look the other way and ignore regulations themselves to continue to receive assignments and make money.  If they don't, they get blacklisted and loose business. 

It has been reported in articles recently (sorry I don't have links available right off hand) that there are approximately 18,000 unlicensed "mortgage professionals" in Arizona, not to mention the licensed ones.  Some of the "bad apples" that were weeded out from other states migrate to Arizona to do business along with the ones already here.  Added to that, all the appraisers that ignore regulations, is why Arizona ranks high in fraud.

Just out of curiosity - I would like to know who I am commenting with.  If you prefer not to disclose that on the forum, you can send me a private email.  It will be kept confidential.

  

Jan 20, 2008 04:56 PM
Anonymous
Curious Professional

David,

I apologize - my question was not clearly written (yesterday was a long day for me and it's now painfully obvious!).

What I meant to convey is that I suspect that the Appraisers seldom report the violations or inappropriate requests to the regulatory agencies. You have answered this in your follow up to my post.

As I said before, it's too bad that this industry has become saturated with people that don't treat it as a serious and important profession.

I will email you my info - I just like the freedom of posting anonymously.

Jan 21, 2008 08:10 AM
#23
Kenneth M Rossman
Appraiser, Ken Rossman - Boynton Beach, FL
FL Certified General Real Estate Appraiser #RZ3504
An easy, painless way for appraisers to "report" attempts at lender coercion would be  on Pam Crowley's Mortgage Fraud Watchlist...   http://www.mortgagefraudwatchlist.org/  If the property in question later funds "improperly", regulators have a trail to follow.  In NY, the NY AG's office is extremely interested in being advised of any lender coercion.
Jan 21, 2008 09:02 AM
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ
AZAppraiser

Kenneth  -  Thanks for providing the link to the Mortgage Fraud Watchlist site.   It should be mentioned that submissions to the site can be made anonymously by members or non-members.

 

 

Jan 21, 2008 10:41 AM
Sara Goodwin
Estimation Nation Corporation - Portland, OR
Portland, Oregon Appraiser

Hello Curious Professional -

In regards to your question about turning anyone in to a regulatory agency, I will say that I have on two (or three?) situations.  The two I remember were reported only after I could determine through much research that there was something blantantly fradulent going on. I believe that everyone in real estate should act accordingly so that we don't repeat the history of the mess the mortgage industry is currently in.

Jan 21, 2008 12:19 PM
Sara Goodwin
Estimation Nation Corporation - Portland, OR
Portland, Oregon Appraiser

Hello Curious Professional -

In regards to your question about turning anyone in to a regulatory agency, I will say that I have on two (or three?) situations.  The two I remember were reported only after I could determine through much research that there was something blantantly fradulent going on. I believe that everyone in real estate should act accordingly so that we don't repeat the history of the mess the mortgage industry is currently in.

Jan 21, 2008 12:19 PM
Barbara S. Duncan
RE/MAX Advantage - Searcy, AR
GRI, e-PRO, Executive Broker, Searcy AR

I have to do bpo's for foreclosures and they ask if the market is steady or declining or increasing.  I always put stable and wonder how on earth one determines this information anyhow.  The foreclosure folks really expect a lot from me, a person not trained in appraising.  Do you use MLS figures to get the market trend?

Thanks for the post.

Jan 21, 2008 12:30 PM
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ
AZAppraiser

Barbara  -  Yes you can use MLS to determine market trends.  You can create a template spreadsheet for the data and produce a chart graph.  The MLS I use has a statistics tab and shows data on the AREA NUMBER for each month and yr-to-date which I use for the market area.  You can also use Case-Shiler, OFHEO, or NAR Indexes - I use OFHEO for the State and Major City level.  And I also use MLS for the neighborhood area but I have to set my own search criteria and chart the data on a monthly search to produce a graph (again spreadsheet template).  Another good source for state and individual city data (rather than major metropolitan areas) is  Altos Research  -  http://www.altosresearch.com/altos/website/Home.page - I also calculate the absorption rate (spreadsheet graph) for the city, market area, and neighborhood level for an indicator of trends, plus the list-to-sale-price ratio (spreadsheet graph) for adjusting the active/pending competative listings before the time adjustments.   There is also a good article posted in Appraisal Scoop regarding market trends - http://appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2008/01/outside-the-b-2.html

It may seem like a lot of work - which it is - but once you create a spreadsheet template, it's just a mater of entering the data to create a graph.         Welcome to our world. :)

 

 

 

 

Jan 21, 2008 03:21 PM
Kendall Bryan
Bryan Real Estate Services, Inc. - Jacksonville, FL
As long as you are able to back up your data you are in the clear. I would ask them to send their request in writing and then send that off to www.mortgagefraudwatchlist.org
Jan 22, 2008 01:41 AM
Kenneth M Rossman
Appraiser, Ken Rossman - Boynton Beach, FL
FL Certified General Real Estate Appraiser #RZ3504

 Barbara - You could also do a brief absorption analysis by defining a peer group and comparing recent comparable sale stats to available inventory. It only takes a few minutes per assignment.

Here is an example from a recent assignment I completed...

"There have been 22 sales of single family homes within 11550 in SD#2 (built 1900 to 1945) during the past 12 months ranging in sale price from $325,000 to $465,000 indicating an absorption rate of approximately 1.83 sales per month. There are currently 42 single family homes listed within 11550 in SD#2 (built 1900 to 1945) ranging in list price from $259,900 to $495,000 indicating a roughly 22.95 month supply of available inventory."

Jan 22, 2008 02:12 AM
Barbara S. Duncan
RE/MAX Advantage - Searcy, AR
GRI, e-PRO, Executive Broker, Searcy AR
Kenneth, that all sounds so HARD!  No wonder you are a certified appraiser.  The relo people and the foreclosure people can't possibly expect ME to do that.  Is 11550 the zip code?  SD#2 a subdivision?  In your example above that's a bad thing, right?  There are too many houses on the market? 
Jan 22, 2008 04:52 AM
Kenneth M Rossman
Appraiser, Ken Rossman - Boynton Beach, FL
FL Certified General Real Estate Appraiser #RZ3504
Takes me maybe 4-5 minutes using a few simple MLS searches.  11550 is a zip code (Hempstead, NY) SD#2 is the School District.  Bad? I guess - it is what it is...  Approaching 2 yrs active inventory is certainly not good, but I have seen worse.
Jan 23, 2008 06:33 AM
John Fariss
Fariss Appraisal Services - Bakersfield, CA
Appraiser - Bakersfield, CA
I'm glad to see I'm not the only one who gets those requests.Good for you for standing your ground.
Jan 25, 2008 07:13 AM
Dione Sage
Nova Home Loans - Gilbert, AZ

I have found myself angry one too many times over the years when others do not show the same moral conscience/integrity as me. It really burns me when people get taken advantage of but I have to have faith that karma will come back to bite these people in the butt. And hopefully when the dust clears from this whole "reform or crisis or whatever people want to call it" then the ones that deserve to be in the business will still be standing and hopefully all the ignorant shady ones will go on to find another line of work. Good luck to you though I wish you the best. Try to keep your chin up.

Apr 07, 2008 05:50 AM
Robin Willis
eXp Realty - Tucson, AZ
CDPE, SRES, Associate Broker

Too bad you don't work in Tucson.  Sometimes I have to refer my clients to an appraiser to back up my estimate of value.  I like to list it right the first time so it gets sold in a timely manner.

Apr 07, 2008 06:08 AM
David Hintz
Accurate Appraisals & Consulting of AZ - Maricopa, AZ
AZAppraiser

JOHN  -  I'm sure there are many others getting the same requests.  Also, since the time I first posted this thread I have received similar requests from two other LOs on two other assignments that I had done.  After standing my ground on both, one had the nerve to call back a month later wanting me to recertify and sign off on the appraisal prepared by another appraiser, when the property was purchased last year, to this years date.  Can you believe that???

DIONE  -  I hear what you are saying.  I always keep my chin up - even when your company quit sending me orders and switched to an AMC!!  Tell your office manager to switch back!!  LOL !!!

ROBIN  -  I can do Tucson since I am in Maricopa (Pinal Cnty) but my fees are higher to cover the commute.

Apr 07, 2008 06:55 AM